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I'm not convinced this will be the strategy that saves Radio Shack. You can buy batteries and earbuds anywhere. ( Note that headphones are currently the hot item and not earbuds).
Discussion by Jim Grant on CNBC yesterday about things like this:
"The prospective cost is the unmasking of the misallocations of capital that will have come about through the levitation of asset prices," including real estate, Grant said.
"If companies can't fail that means somebody else can't start. You're looking at a petrified forest rather than dynamic capitalism," the founder and editor of Grant's Interest Rate Observer told CNBC's "Squawk Box," ahead of his spring investor conference in New York City, featuring Jack Bogle, David Einhorn and Bill Gross, among other financial luminaries."
JCP, Sears, Radio Shack, etc are all dinosaurs and will eventually be extinct. The life cycle of companies, is not much different than the human body. Eventually your usefulness to the marketplace wears out and a new company takes your place.
For the private equity firms that loan these companies money, it's the greater fool theory. PE firm #1 loans them money at a very high interest rate. When they can no longer pay their note payments, the PE firm now owns them. Then they make small improvements to cost controls, and dress up their P&L for a brief period of time. Refi the debt at a lower interest payment (now the PE firm is made whole on the deal), and ANYTHING they can sell them for is profit. Sell to PE firm #2 and repeat.
It just delays the inevitable, IMO, but I guess the people that get their paychecks from RadioShack will take that over the alternative.
JCP, Sears, Radio Shack, etc are all dinosaurs and will eventually be extinct.
I concur. Foot traffic is still heavy in JCP during the holiday. RS stores are in life support mode. Having said that, many clothing retailers could follow the same path of decline.
In my ventures through the local mall, the busy stores were Apple, Forever21, Macy's (eternal sales) Nordstroms and some smaller names. Sears was a ghost town. Penny's was even worse. A lot of specialty stores had no customers. Starbucks was busy as were the cell phone stores like T-Mobile and ATT etc.
Comments
"The prospective cost is the unmasking of the misallocations of capital that will have come about through the levitation of asset prices," including real estate, Grant said.
"If companies can't fail that means somebody else can't start. You're looking at a petrified forest rather than dynamic capitalism," the founder and editor of Grant's Interest Rate Observer told CNBC's "Squawk Box," ahead of his spring investor conference in New York City, featuring Jack Bogle, David Einhorn and Bill Gross, among other financial luminaries."
http://www.cnbc.com/id/102565607
For the private equity firms that loan these companies money, it's the greater fool theory. PE firm #1 loans them money at a very high interest rate. When they can no longer pay their note payments, the PE firm now owns them. Then they make small improvements to cost controls, and dress up their P&L for a brief period of time. Refi the debt at a lower interest payment (now the PE firm is made whole on the deal), and ANYTHING they can sell them for is profit. Sell to PE firm #2 and repeat.
It just delays the inevitable, IMO, but I guess the people that get their paychecks from RadioShack will take that over the alternative.
Regards,
Ted